Stock of public sector banks continue to drag the broader indices down with the Sensex closing at 33.774 – down 236 points or 0.7% while Nifty ended 74 points or 0.7% lower at 10,378.

Public sector bank stocks are under pressure after the Rs 11,500 crore scam at the Punjab National Bank broke last week after fraudulent letters of undertaking (LoUs) were issued from a branch in Mumbai to secure overseas credit.

PNB shares fell 7.3% on Monday, and in the last four sessions that is since the fraud was reported, the stock tanked 31%. The fraud also impacted government banks with Bank of Baroda shares fell 5.48%, Bank of India shares fell 4.07%, Allahabad Bank 6.03% and State Bank of India 1.5%. The Nifty PSU Bank index dropped 2.5% to a four-month low.

There was concern that loan impairment to banks could rise above Rs 20,000 crore as PNB remained illusive on paying its dues to other banks. Last week, Reserve Bank of India has clarified that it not asked PNB to pay dues to other lenders.

“There has been a sharp recovery in the global markets, but India has seen huge selling pressure on every rally due to the recent turn of events domestically, one after another,” said said Devang Mehta, head of equity advisory, Centrum Wealth Management. “The much awaited revival in earnings growth also looks unclear currently,” he added.

Renewed concerns that a rebound in global crude oil prices will have an adverse impact on fiscal deficit too weighed on the benchmark indices.

Among index losers was Tata Steel, who shares fell 5.8% followed by Dr Reddy’s Laboratories and Adani Ports, which lost 2.7%. Foreign portfolio investors (FPIs) net sold shares of around Rs 900 crore, while the domestic institutions purchased shares about Rs 580 crore . (End)